Chancellor Allen and the Fundamental Question

Abstract

During his tenure on the bench, Chancellor William Allen was widely regarded as the leading judicial expert on matters of corporate law. In this Article, I attempt to explain Chancellor Allen's expansive reputation by examining his ability to speak to what philosopher John Danley calls "the fundamental question": "What is the appropriate role of the modern corporation in a free society?" Nowhere in corporate law is the fundamental question more conspicuous or more relevant than in takeover cases implicating the shareholder primacy norm. When a board of directors has elected to sell control of a corporation, Delaware courts evaluate the behavior of the directors pursuant to standards announced in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., which requires directors to obtain "the highest price for the benefit of the stockholders." Chancellor Allen began his judicial tenure shortly before the Delaware Supreme Court decided Revlon, and Allen's first opinion citing Revlon appeared less than one month after the Supreme Court's opinion was issued. Allen's final Revlon opinion was written shortly before he left the bench. In the 11 years between his first and last opinions dealing with Revlon, Chancellor Allen successfully defended the traditional allocation of power over corporate decision making among directors, shareholders, and courts by artfully and insistently rebuffing attempts of the Delaware Supreme Court to expand the role of the courts into areas where they have no useful role. In so doing, Chancellor Allen helped to ensure that the appropriate role of the modern corporation in a free society would be decided by individual actors in that society rather than by judicial fiat.